Today: Facebook adds a "third pillar" to its social network, a search function that could spell trouble for other tech companies. Also: Apple (AAPL) closes lower than $500 for the first time since February, but indexes stay afloat.

Facebook offers new search function, which could affect other tech firms

After a week of anticipation, Facebook on Tuesday announced the "third pillar" of the world's leading social network, a search function entering beta mode that will allow users to easily search information posted by friends and to the public.

CEO Mark Zuckerberg and other executives announced the new offering at the company's Menlo Park headquarters in front of assembled media, which had been invited a week earlier, helping send Facebook shares to heights unseen since the summer. Investors seemed disappointed by the announcement, but not resoundingly so -- Facebook shares dropped 2.7 percent, but stayed above the $30 level it surpassed in the excitement about the event.

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"Graph Search," as Facebook calls it, offers the chance to find interests, photos and places that are popular with a user's friends. Zuckerberg was adamant that all the information one could find though the search function was already visible to them, in an attempt to allay privacy concerns, but also admitted that the service is not monetized yet, so will have no material effect on its revenues. Most users will not get an immediate crack at the search function, either, because it is still being tested; users can sign up for the beta-testing waiting list here.

What the offering will do, if it is successful, is keep Facebook users on the social network's site longer, giving it more opportunities to advertise on users' News Feeds and Timelines, the other two "pillars" of Facebook. While some users may find the offering creepy, it offers a wealth of possibilities for users that could accomplish the company's goal of more hours of their time.

Those hours will come away from other companies, however, and Facebook's announcement Tuesday seemed to affect many other important tech companies, with investors having their say on Wall Street.

Google (GOOG) -- Graph Search will not search the Web, which keeps Facebook from direct search competition with the biggest bully in the sector. As Danny Sullivan of Search Engine Land points out, the new offering is completely different from Google; for a personal touch, The Wall Street Journal's Tom Gara points out that your friends are not as smart as the Internet. However, Google has tried to integrate social results in its search with weak results, so Facebook could eventually find a way to accomplish a goal the search leader has not. Also, as Gartner analyst Brian Blau told the Mercury News, "in the future, you know Facebook will figure out how to monetize this," which would make them a bigger competitor to Google for search-related advertising. The company's stock price jumped around wildly during the Facebook event, but ended up almost flat, with a 0.2 percent increase.

Microsoft -- While Graph Search will not search the Web, Facebook did announce a partner in the effort: Microsoft's Bing will perform Web searches on queries that cannot be answered by Facebook's offering, giving a boost to the Google competitor. Microsoft invested in Facebook long before it became the world's largest social network, and this type of partnership is the result; Bing also offers some Facebook functionality on its search site. Microsoft stock gained 1.2 percent on the day, thanks to a steady climb after Facebook's announcement.

Yelp and Foursquare -- These two tech companies could be the most affected by Facebook's offering, as it allows people to directly find places in distinct areas that their friends have recommended. "Thanks to Graph Search, Facebook is about to be much, much better for finding places such as restaurants, cafes, bars and the like," TechCrunch writer Colleen Taylor said. Yelp and Foursquare rely on those types of queries for their own products, and are already facing tough competition from the likes of Google, which uses its Zagat and Frommer's acquisitions to offer tons of info about destinations around the world. The one saving grace for those two companies: Facebook is focusing on desktop Graph Search first, ceding them the powerful mobile audience that Yelp and Foursquare have focused on for years. Long-term doubts continue to spiral, though: Yelp shares plummeted 6.2 percent Tuesday.

LinkedIn -- The new search function adds better ability to network professionally, the domain of Mountain View social network LinkedIn. While LinkedIn has more than 200 million users, Facebook has more than a billion, so a search for, say, "Friends of friends who work at Yahoo (YHOO)" could theoretically be much more productive on the larger social network. Similarly, Facebook could challenge dating sites such as OKCupid or Match.com, which thrive on users' ability to search profiles of single people with specific interests. With Graph Search, searches such as "Single women who like James Bond movies" could pull users away from those sites and keep them on Facebook. LinkedIn took a big dip after Tuesday's announcement but recovered before the close, ending with a 0.3 percent gain.

Apple stock reaches a new low as analysts debate iPhone demand

Apple's fall reached a new low Tuesday, as the stock closed lower than $500 for the first time in nearly a year after reports Monday suggested that demand for the company's iPhone was weaker than expected.

Apple fell more than 3 percent for the second consecutive day, declining 3.2 percent Tuesday to close at $485.92, its lowest closing price since Feb. 8. The company's stock price -- which was already in bear market territory after declining more than 20 percent from its peak reached on the day the iPhone 5 launched in the United States -- has now fallen an additional 6.6 percent since The Wall Street Journal and Nikkei reported Monday morning that Apple had cut component orders for the iPhone due to weak demand.

Many analysts still doubt the report, and said so loudly. Sterne Agee analyst Shaw Wu issued a report that said, "As far as we can tell, iPhone 5 demand remains robust," and Baird analyst William Power said "most demand indicators remain favorable." Others suggested that Apple has improved their production to the point that fewer components are needed or that Apple is changing screen technology for the next generation of its smartphone, which brings in the majority of Apple's profits.

Still, there are analysts who agree with the report. Nomura analysts reported Tuesday that their checks showed "weaker-than-expected sales of the iPhone 5," leading the group to cut their price target on the stock from $660 to $530 and reduce estimates for iPhone sales in the holiday-shopping quarter, as well as the current quarter and full year.

Apple could prove volatile on Wall Street for at least another week, as the sales totals for the holiday quarter will remain a mystery until the company releases its earnings report on Jan. 23.

Tech stocks have a bad day, but retail stocks save other indexes

Surprisingly, Wall Street was again able to mostly weather a large drop in the world's most valuable company, as only the tech-heavy Nasdaq declined on the day among the three major U.S. stock indexes, and it dropped just 0.2 percent. The SV150 index of Silicon Valley's largest tech companies was not as fortunate, declining 1.1 percent on the day.

Retail stocks helped the other indexes advance, as the Standard & Poor's 500 and Dow Jones industrial average moved slightly higher after a report showed that holiday sales were better than the dire reports issued earlier, though still not as strong as hoped before the shopping season began.

Among tech companies, Hewlett-Packard (HPQ) and Netflix (NFLX) couldn't keep their momentum rolling, as the two companies dropped 2.5 percent and 1.7 percent respectively. On the positive side, Symantec gained 4.7 percent after Morgan Stanley increased its rating and price target for the Mountain View company, while two of Silicon Valley's newest public companies, Splunk and Palo Alto Networks, gained 6.9 percent and 3.3 percent, respectively.

And the widely watched Standard & Poor's 500 index: Up 1.66, or 0.11 percent, to 1,472.34

Check in weekday afternoons for the 60-Second Business Break, a summary of news from Mercury News staff writers, The Associated Press, Bloomberg News and other wire services. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.